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Life sciences investing is up against the ropes. The sector has been beset by such high capital costs and such long paths to market that many venture partners don’t seem to want early- and mid-stage biotech companies tarnishing their portfolios anymore. Hence the news last week that Menlo Park, CA-based Morgenthaler Ventures and Boston-based Advanced Technology Ventures are shedding their life science investing teams and merging them into a new independent biotech fund—and the news today that Scale Venture Partners of Foster City, CA, is ceasing new healthcare investments altogether.

The ScaleVP announcement came this morning in the form of a blog post and press release. Kate Mitchell, ScaleVP’s managing director, said that after long discussion with limited partners, the firm decided that healthcare investing—where the unpredictable rigors of FDA review are making it harder to get new treatments to patients—is not compatible with the firm’s focus on mid-stage investing.

As its name indicates, ScaleVP generally focuses on identifying companies that have early revenues and helping them scale up until they’re ready for an IPO or acquisition. The firm has successfully shepherded a few life sciences and healthcare companies to that stage, including Seattle Genetics, Cellective Therapeutics, IPC The Hospitalist Company, and National Healing. But for other companies in its portfolio, the process has become too expensive and unpredictable, largely due to the “vagaries” of the regulatory review process for new drugs, Mitchell says.

“In the last four years, our companies have filed seven NDAs [new drug applications]; five of them have been approved and two are pending—something we are proud of,” she writes in today’s post. “Unfortunately, they took longer and used more capital than planned from the start…The partners believe that the vagaries of the FDA and the resulting increase in time and capital needed to take these companies through to a real exit doesn’t fit our mid-stage fund strategy any longer.”

Mitchell (who is an Xconomist) has been active in efforts to remove regulatory barriers to growth for emerging healthcare and technology companies. She’s a past president of the National Venture Capital Association, which puts part of its lobbying energy into Washington lobbying into promoting streamlined FDA regulations. More recently, she chaired an “IPO Task Force” that issued a report last month calling on Congress, the White House, and the Treasury Department to ease rules that make it prohibitively complex and expensive for emerging companies to go public.

But Mitchell says that none of these changes will happen fast enough for ScaleVP’s purposes. “Our team has been closely watching the regulatory environment in the healthcare field for years, and we are heartened by the dialog that is beginning to take place between our industry and the regulators,” she writes. “We will continue to be active in that conversation but think that the timing of a resolution that benefits emerging companies tackling important healthcare issues will be beyond our investing horizon.”

Mitchell hastened to add that ScaleVP’s decision is “not a signal of the end of healthcare investing for VCs. Healthcare should and will continue to be a good place to invest for many of our peers who have earlier or later stage mandates.”

Since May 2009 ScaleVP has been investing out of its $255 million Fund III. Managing directors Lou Bock and Mark Brooks oversee the healthcare part of the portfolio, which includes Alimera Sciences, Ascenta Therapeutics, LivHome, National Healing, New Century Hospice, Oraya Therapeutics, Sonexa Therapeutics, and Spinal Kinetics. They’ll stay on with the firm, according to Mitchell’s announcement, in order to “support their portfolio companies and maximize return to investors.”

ScaleVP has already changed the front page of its website to indicate that it invests primarily in Internet, software-as-a-service, mobile, and cloud computing companies. Reflecting the new focus, the firm announced that Stacey Bishop, who led ScaleVP’s investments in ExactTarget and Omniture, has been promoted to managing director.

Xconomy is scheduled to talk with Mitchell later this morning, and we’ll update this story as warranted.